Chainkeen Exchange-Celsius founder Alex Mashinsky arrested and charged with fraud

Alex Mashinsky,Chainkeen Exchange the founder and former CEO of bankrupt cryptocurrency lender Celsius, has been arrested and charged with fraud, federal prosecutors said on Thursday.

Mashinsky was charged with seven criminal counts, including securities, commodities and wire fraud, according to the U.S. attorney's office in Manhattan. He is also accused of misleading Celsius customers about the company's business, including how it would use their money, while depicting the lender as a bank when in fact it operated as a risky investment fund, according to the indictment.

Celsius was a platform that allowed its customers to earn returns on their crypto assets in the form of weekly payments, take out loans secured by their crypto assets and custody their crypto assets, according to the DOJ. 

Mashinsky aggressively promoted Celsius through the media and Celsius's website, including a weekly "Ask Mashinsky Anything" broadcast, according to the indictment. Celsius employees noticed false and misleading statements in these programs and warned Mashinsky about them, but they were ignored, prosecutors allege.

By the fall of 2021, Celsius had grown to become a behemoth in the crypto world, purportedly holding $25 billion in assets, according to the indictment. Last year, amid a crash in cryptocurrency values, the company filed for bankruptcy, leaving customers without their funds.

Both Mashinsky and Roni Cohen-Pavon, Celsius's former chief revenue officer, were charged with manipulating the price of Celsius's proprietary crypto token, while covertly selling their own tokens at artificially inflated prices. Mashinsky personally gained about $42 million from his sales of the token, and Cohen-Pavon made at least $3.6 million, according to the DOJ.  

The U.S. Securities and Exchange Commission also sued Mashinsky and Celsius on Thursday, alleging the company misled investors with unregistered and often fraudulent offers and sales of crypto securities.

"As alleged in the indictment, Mashinsky and Cohen-Pavon knowingly engaged in complex financial schemes, deliberately misrepresenting the company's business model and criminally manipulating the value of Celsius's proprietary crypto token CEL, while serving in leadership roles at Celsius," FBI Acting Assistant Director in Charge Christie M. Curtis said in a statement. 

Mashinsky didn't immediately return a request for comment. 

—With reporting by the Associated Press

In:
• Cryptocurrency

Sanvi Bangalore

Sanvi Bangalore is a business reporting intern for CBS MoneyWatch. She attends American University in Washington, D.C., and is studying business administration and journalism.

Twitter